Rising charter-school payments and growing retirement costs have Hempfield Area school officials exploring how to offset a 2025-26 budget deficit that currently stands at more than $5 million.
District business manager Paul Schott said expenditures for next year are up by nearly $7.3 million over 2024-25.
“Without the impact of things like charter-school costs, growing retirement payments and transportation increases, we would be in a much better position,” said Superintendent Mark Holtzman. “There are just a variety of factors that are out of our control.”
School districts across the state got a respite from growing payments to the state’s Public School Employees Retirement System, when their mandated contribution rate dropped from 35.26% in 2022-23 to 33.9% in the current school year. Starting in 2025-26, however, that percentage will begin climbing again, from 34% next year to a projected 38.51% in 2032-33.
Holtzman said the number of students leaving Hempfield Area to attend charter schools has also increased in recent years, and he was hopeful the Pennsylvania General Assembly will consider capping cyber charter payments at $8,000 per student, a measure included in Gov. Josh Shapiro’s recent budget proposal.
Public schools pay between $8,600 and $26,500 per student each year to cyber schools, which are authorized and overseen by the state Department of Education.
“If the legislature went with the $8,000 flat fee per student, that would bring $2.5 million back to the district,” Holtzman said.
Earlier this year, district officials agreed not to exceed the maximum allowable tax hike, which for Hempfield is 4.35 mills. Holtzman said the maximum tax hike would only reduce the $5.1 million budget deficit by half.
Schott said the district’s debt service has been trending down the past four years, from $9.7 million in 2021-22 to a projected $8.7 million next year, and that the deficit has not been caused by bonds issued for the proposed high school renovation or any other capital improvement projects.
Both Schott and Holtzman cautioned against using the district’s fund balance — projected to be more than $17.8 million at the end of next year — to supplement too much of the budget deficit.
“Our fund balance is healthy, but it can get eaten away over time,” Holtzman said.
Schott said districts must be strategic in how they use their fund balances.
“What you don’t want to do is use your fund balance on reoccurring expenses for three, four, five years in a row,” he said. “That’s how you end up with no fund balance very quickly.”
Schott cited the same logic last year in utilizing a tax hike to offset significant increases in healthcare costs, another reoccurring expense.
The proposed final budget for 2025-26 will likely be adopted at the school board’s May 19 meeting.